This Marketing strategy Assignment is given for the HND Course of marketing Specialization.
Tesco PLC is a British retail chain and is the second largest retail giant in the world. Tesco as a business is focused around customers and employees and aims in providing better opportunities for the employees and aims in having more loyal customers through the main objective of providing best in class product and service. However, being a PLC, Tesco was able to manage its capitals in a better way with lesser liabilities and greater expansion scopes. But the growth is always limited owing to the limited number of shares.
LO1 Understand the process of strategic planning
1.1 Explain strategic contexts and terminology – missions, visions, objectives, goals, and core competencies.
Mission statements of the organizations mainly states the purpose and the objective of the companies. The Vision statements of the organizations provides a picture of the organization’s future plans which includes their long term and short term goals. Core competencies on the other hand refers to the competencies which each of the organizations possess in product and service offering and make them distinguished from their competitors (Ziliani, 2004).
Tesco PLC has a long term success story and is a highly focused business. It had a very constant business mission while its operations kept on changing with the changing business environment. Tesco PLCs mission statement is “To be the most highly valued business by: the customer to serve, the communities in which we operate, our loyal and committed colleagues and of course of the stakeholders”. Tesco has over the year met the expectations of all it stakeholders in alignment with its business strategy for growth (Ziliani, 2004). Moreover, it has always looked forward for a more diversification with the both geographically as well as in business like financing,telecomand internet services.
1.2 Review the issues involved in strategic planning
Strategic planning involves a complete range of effective skills to device ideal and materialistic strategies that works in accordance with the mission and vision of the companies. The strategic marketing planning process differs from company to company but the central motive remains the same which is to gain financial profits and give more returns to the stakeholders (Teece, 1997). Strategic planning process may also encounter several issues in matching the plans with the actual execution process. Several other issues like manpower, economic downturns and forecasting also affects the organizations in a highly fragile economic environment. Strategic planning process also involves high involvement of the efficient leadership without which strategic planning cannot be executed with perfection.
Following are few of the specific issues which organizations face in strategic planning:
- Lack of clarity of the Planning process ‘need’.
- Unaware of the issues and the various constraints that might impact the planning process as well as the tangible outputs.
- The thinking process behind the financial forecasting may be constrained.
- Stringent process which restrict the people to perform with independence.
- Lack of focus on external factors: like economic environment and competitors.
- Lack of concentrated focus on growth opportunities.
- More focus on short term/ tactical issues rather than on the strategic ones.
Tesco as at some point faced issues on strategic planning especially in the globalization front with the growth opportunity planning. It also faced several challenges when it had to address its strategic plans for countering the competitors in UK and China (Teece, 1997).
1.3 Explain different planning techniques that facilitate strategy formulation. You may consider BCG growth-share matrix, directional policy matrices, SPACE, PIMS.
Several organizations takes into consideration several techniques for strategizing their plans like BCG growth share matrix, SPACE, PIMS, etc. These models provide several insights into strategic planning process as well as render effective results if analysed with perfection.
BCG matrix helps in portfolio planning for all the business or the product lines which a company has and are marked under 4 major quadrants – Stars, Question mark, Cash Cows and Dogs. The Stars quadrant depicts high growth along with high Market Share. The Question mark depicts High growth with Low Market share. Cash Cows depict Low growth with High market share and Dogs depict low growth with low market share (Teece, 1997).
BCG matrix for Tesco – Tesco as an organization had taken several ardent steps in ensuring that the best in breed policies are enforced for the development of the strategic plan. Tesco on the BCG Matrix will come in the quadrant of cash cow as it provides high quality products and add-on customer services and is also deliberate in providing new better products and varied levels of services in in its countries of operations. Simultaneously the company may also be considered in the Stars quadrant as Tesco had put in tremendous efforts to expand the awareness of their customers for the varied level of benefits they provide in the e-commerce and retail management segment.
LO2 Be able to formulate a new strategy
2.1 Produce an organizational audit for chosen organization. You should consider using SWOT analysis; product positions; value-chain analysis to conduct the audit
The SWOT analysis for Tesco is as follows:
- Tesco is considered to be the largest retail outlet in UK and has over 1488 outlets.
- A strong Brand Name with good brand recognition.
- Acquisitions has been an integral form of their growth strategy.
- Considered to be the second largest retailer in the world.
- Comprehensive use of modern methods of technology and advancements in improvising its services (Ziliani, 2004).
- It is becoming difficult for Tesco in focusing its strategies pertaining to a single market in its area of specialization as it is entering numbers of different markets.
- Decision of diversifying into unrelated markets and inexperienced plots.
- Non clarity in policies pertaining to several environmental aspects
- Centralization of the business and high level of dependency in the UK market.
- Formation of strategic alliance with smaller players for more market penetration.
- Tesco might also look for Market extensions as part of their globalization strategy.
- Tesco may also look out for options of Join venturing in new and diversified businesses (Teece, 1997).
- Look out for strategic alliances with existing players in the newer markets.
- Aggressive threats from its competition like Sainsbury’s, Morrison’s, and Marks & Spencer in the UK market.
- Change in governmental policies involving the monetary and fiscal policies.
- Changing behaviour of the customers.
- Change in the Economic patterns in the countries of operations.
Tesco being a retail giant focuses a lot on its product and service offerings and Tesco had also undertaken several measures to reduce environmental pollution by having improved packaging methods. It had also taken several measures to use recyclable products for packaging and use. This had reduced non-degradable product emission in the environment. Tesco as an organization had a very traditional approach of its involvement with the communities. From a social responsibility perspective, it conducts several promotions and spreads information for the benefits of the customer on the personal health front. It had also taken several measures in ensuring that the customers get the best quality products at the most competitive price. It also does several Corporate Social Activities like supporting several NGOs for the betterment of the society.
Value Chain Analysis
Tesco performs several activities that is a core part of its value chain model. It has a comprehensive Inbound and Outbound Logistic system which does the inventory management and collection activities (Kim, 2005). It also has a Quality Assurance unit which takes care of the quality of the product and service offerings. It also has a robust team that looks into the marketing and sales of the various products, invoicing as well as providing value to the customers. It also looks for several feedback from the customers and is well placed in the Value Chain Model for delivery of its offerings.
2.2 Carry out an environmental audit for chosen organization. You should use PESTLE or STEEP and Porter’s 5 forces analysis for the environmental audit.
The PESTLE Analysis gives an overview of the various activities pertaining to the external environment in which the company operates.
- Political- the UK government’s policy has several stringent monetary and fiscal policies which had restricted its growth in the UK market in greater potential areas.
- Economic- Tesco had also encountered several tax related issues based on the regulations of the country of its operations.
- Sociological- Tesco had taken several measures in order to be complied with the social environment and actively takes part in several socially relevant projects for the development of the society (Johnson, 2008).
- Technological-Several advancements had taken place on the e-commerce system which had made Tesco one of the technically advanced retailers in UK.
- Legal- Tesco is also under several legal regulations both with as well as outside UK.
- Environmental- The environmental conditions of the UK and the countries of Tesco’s operations are highly favourable for carrying out the business with minimal impact on the essence of the environment...
Porter’s Five Force Model
Threat of substitute products and services
The threat of substitutes being in the retail market is considered to be low for the various offering in the food items domain and medium for all other non-edible items.
In the retail industry for foods, the various substitutes that are present for the major retailers are smaller retail chains of grocery stores, and several shops which sell organic products are not considered to be a threat to retail giants like Tesco that provides quality products at reasonable price (Johnson, 2008).
However, there is a big threat of substitutes for the non- edible items. During difficult economic times, the retailers may offer better products than Tesco and this might be a challenge.
Threat of New competitors
The threat of entry of new competitors for Tesco is low.
Retail industry especially in the food business requires huge investments and tremendous effort in conceptualizing the retail business and create brand value. There are several retail giants like Tesco, Sainsbury’s and Morrison’s that have capitalized the retail markets in UK which contributes maximum share to the retail industry in UK. Thus, the new entrants have to compete with the established players in the market which is hard to attain (Ziliani, 2004).
Establishing a new retail business involves several governmental regulations and operational excellence and therefore is a hard task to enter a new player.
Intensity of competitive rivalry
- The intensity of competitive rivalry for Tesco PLC is extremely high.
- Tesco encounters stiff competition from its immediate competitors, like Asda, Sainsbury’s, and Morrison’s, which compete over prices. It should therefore be highlighted that Asda and Morrison’s are the key competitors on which the focus should be based of Tesco to gain advantage. There had been significant level of competition owing to the fact that there had been less growth of the retail industry in UK which is a serious threat to Tesco’s market share (Johnson, 2008).
- There are also several smaller players like Somerfield and Co-op which also compete in the rural markets with Tesco.
Bargaining power of buyers
- In Tesco’s scenario, the bargaining power of buyers is considerably higher owing to be in the retail business.
- Buyers eventually tend to switch to cheaper products with similar of better qualities and the retailers have very minimal control over the same (Dwyer, 2000). Here the switching cost is very less.
- In today’s buying scenarios where the buyers are moving towards online shopping, where the costs associated are also less, there is a high chance that the buyers may be switch to easy mode of shopping for their retail grocery items.
Bargaining power of suppliers
- The bargaining power of suppliers in Tesco’s scenario is very low.
- It is observed that the suppliers are more inclined towards bigger retailers in the food and grocery business and seeks long term business contracts with big retailers. Therefore all the major retailers have a higher control over these suppliers and can pressurize the suppliers for having more competitive prices to gain market share.
2.3 Explain the significance of stakeholder analysis for your chosen organization
Tesco PLC has a long term success story and is a highly focused business. It had a very constant business mission while its operations kept on changing with the changing business environment. Tesco PLCs mission statement is “To be the most highly valued business by: the customer to serve, the communities in which we operate, our loyal and committed colleagues and of course of the stakeholders”. Tesco has over the year met the expectations of all it stakeholders in alignment with its business strategy for growth (Dwyer, 2000). Moreover, it has always looked forward for a more diversification with the both geographically as well as in business like financing, telecom and internet services. Over the years, it had provided best in class products and services to its customers as a value proposition. It had also taken great care of its employees by providing several employee benefit schemes like bonuses and holidays. It had also been successful in maintaining a very healthy relationship with the various suppliers like Tyrell’s Crisps as well as distributors who are related to its business. Also over the years and even after going Public and listing on the London Stock Exchange, it had constantly provided returns to its shareholders who had faith in the company’s mission and business strategies.
With its strong business values and focused business strategies, Tesco PLC has become one of the top most retailers in the world. At every step of its success it had eventually delivered the expectations to all its stakeholders from the employees to the investors.
LO3 Understand approaches to strategy evaluation and selection.
3.1 Analyse possible alternative strategies relating to substantive growth, limited growth or retrenchment for your chosen organization.
UK market is a highly competitive market and the laws and regulations of the land had eventually resulted the organizations to carry out several internal changes and operate in a limited environment with very less chances of change (Dwyer, 2000). When there was a capping law releases in order to restrict Tesco from increasing the prices of its in-demand products, it started to look out for alternatives in reducing the costs associated with these products or services. It looked out for several vendors from across the globe who could manufacture those products at a cheaper rate than their present suppliers and manufacturers. With the advent of Windfall taxes on the excessive profits, Tesco was compelled to reinvest their excel funds in other businesses and it was during this time that Tesco was compelled to move to diversified businesses in Telecom , Internet supply, financial services, etc. Moreover, in order to reduce its cost structure as well as increase its technological advancements, Tesco made a commendable investment in order to gain a more competitive edge and improved product quality.
It had also take several steps to control its internal environment by retaining its employees as well as providing them with benefits. Tesco also looked out for innovative ways of marketing its products and services during the challenging times to capitalize more and also proved to be a threat to its competition. It took into account several strategies especially on the advertisement front in order to increase its sales as well as induce the target customers to increase their consumption. It also took several advancements especially on the technological advancements front basically to reduce its operation costs in long term as well as gain competitive edge (Dess, 1995).
3.2 Select an appropriate future strategy for chosen organization.
As part of the future plan for Tesco, the following should be focused on:
- To become the leading retail outlet across the globe with high scalability options in next 10 years.
- To attain over 70% of UKs retail market share with strategic partnerships in 10 years.
- Should target to focus on non-edible items and become a major retailer in the diversified products in the next 5 years.
- To be a socially responsible brand with greater market penetration and good social acceptance.
LO4 Understand how to implement a chosen strategy
4.1 Compare the roles and responsibilities for strategy implementation for your chosen organization.
In order to implement the various strategic plans Tesco needs to take into consideration several responsibilities on all fronts in order to counter the foreseen challenges. The various roles and responsibilities are listed below that needs to be followed:
- Tesco needs to take several measures to ensure that the Governmental regulations in UK and other countries have minimal effect on its mode of operations.
- Tesco needs to take utmost care of its loyal employees in order to attain sustainable growth through higher profits and market penetration.
- Tesco needs to take active part in monitoring its business objective, which should be in line with its operational strategies and other marketing and sales plans (Dess, 1995).
- Tesco should also enter into strategic alliance with its suppliers for having long term deals and providing more value in alignment with the strategies planned.
- Tesco should also take up socially relevant activities which would help in connecting with the people as well as deliver value in alignment with its business strategies. This would help in ensuring better customer value and long term relationships.
- Tesco has been quite a vibrant company in adapting to the changes in the environment of its business operations. There had been significant amount of strides which it had taken to counter the challenges during recessionary phases. Tesco should also try to reduce its production system and thereby put a check on its capital outlays.
- Tesco should also looked out for innovative ways of marketing its products and services during the challenging times to capitalize more and also prove to be a threat to its competition.
- It should also try to bring in more technological advancements in managing its business operations.
4.2 Evaluate resource requirements to implement a new strategy for your chosen organization.
For implementing any strategic plan, a strong and efficient force is required to implement and execute the same (Ansoff, 1990). Effective resource planning needs to be done in order to have better alignment with business strategies. Tesco should have the following as part of the resource planning strategy:
- Hire resources who have prior experience in the Retail industry and have proper knowledge of the various retail operations.
- Have an efficient HR management team who delivers value for the employees in motivating and retaining them with better job satisfaction.
- Have proper training and developmental programs to demonstrate and articulate the various strategic plans to its employees.
- The resources from the suppliers also needs to be properly judged and allocated to the various business operations.
- The strategic plans should also communicated to the various stakeholders including the employees, the contract vendors, suppliers, and the other stakeholders for affectively implementing the business strategies.
- Effective and efficient leaders and managers are required for effectively managing communications and information about the various business strategies to their teams.
Thus in Tesco, since the human resource for the core business involves loyal and resourceful professional, high concentration needs to be focused to train as well as manage the same to effectively implement the various strategic decisions.
4.3 Discuss targets and timescales for achievement in your chosen organization to monitor a recommended future strategy.
As part of the future strategic plan, the following needs to be addressed as part of the targets and timelines:
- Leading Retail Giant – There is stiff competition from the local players as well as leading giants like Walmart on the global forum. To become the leading retail outlet across the globe with high scalability options in next 10-12 years. It should also target to capitalize the untapped markets for greater market share.
- Greater Market share- Tesco must focus on converting more of its local customers in UL and try to attain over 70% of UKs retail market share with strategic partnerships in 10 years. UK has a very strong presence of Tesco and it has greater potential if it is able to tap the rural markets and untapped areas thereby increasing its market share in the upcoming decade.
- Diversification- Owing to the competition and the growth of Online retailing, Tesco should target to focus on non-edible items and become a major retailer in the diversified products in the next 5 years. It should enter into strategic alliances with the various diversified product and service offering like electronics, mobiles, laptops, etc. (Ziliani, 2004).
- Corporate Social Responsible Organization – Along with all the business strategies, as part of the global plan, Tesco should also perform several socially relevant projects which would enable it to have several accolades in the society and also have a better picture in the society. It should focus to be a socially responsible brand with greater market penetration and good social acceptance. This can be achieved in phases by coordinating with the various local NGOs in the areas of its operations.
Strategic planning is a crucial as well as an inevitable part of an organization and effective leadership needs to be in place to take care of these plans and implement the same. It is through these strategic plans that organizations like Tesco are gaining more and more success in its areas of operations and is creating more business values for the customers as well as the other stakeholders in the organization. Thus, strategic plans should be an integral focus for every company rather than on the tactical ones.